Power issues when testing the Markov switching model with the sup likelihood ratio test using U.S. output

2002 ◽  
pp. 257-263
Author(s):  
Patrick J. Coe
Keyword(s):  
Likelihood Ratio ◽  
Likelihood Ratio Test ◽  
Markov Switching ◽  
Ratio Test ◽  
Markov Switching Model ◽  
Switching Model

AN N-STATE ENDOGENOUS MARKOV-SWITCHING MODEL WITH APPLICATIONS IN MACROECONOMICS AND FINANCE

2019 ◽  
pp. 1-29
Author(s):  
Shih-Tang Hwu ◽  
Chang-Jin Kim ◽  
Jeremy Piger
Keyword(s):  
Regime Switching ◽  
Likelihood Function ◽  
Markov Switching ◽  
Ratio Test ◽  
Markov Switching Model ◽  
Switching Model ◽  
Finite Samples ◽  
Endogenous Switching ◽  
Volatility Model ◽  
Three State Model

We develop an N-regime Markov-switching model in which the latent state variable driving the regime switching is endogenously determined with the model disturbance term. The model’s structure captures a wide variety of patterns of endogeneity and yields a simple test of the null hypothesis of exogenous switching. We derive an iterative filter that generates objects of interest, including the model likelihood function and estimated regime probabilities. Using simulation experiments, we demonstrate that the maximum likelihood estimator performs well in finite samples and that a likelihood ratio test of exogenous switching has good size and power properties. We provide results from two applications of the endogenous switching model: a three-state model of US business cycle dynamics and a three-state volatility model of US equity returns. In both cases, we find statistically significant evidence in favor of endogenous switching.

A likelihood ratio test for detecting patterns of disease-marker association

1997 ◽  
Vol 61 (4) ◽  
pp. 335-350 ◽  
Author(s):  
A. P. MORRIS ◽  
J. C. WHITTAKER ◽  
R. N. CURNOW
Keyword(s):  
Likelihood Ratio ◽  
Likelihood Ratio Test ◽  
Ratio Test ◽  
Disease Marker
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